‘Vague' law used to convict Skilling troubles high court

‘Vague' law used to convict Skilling troubles high court

Published 6:30 am, Wednesday, December 9, 2009

WASHINGTON — Skeptical Supreme Court justices on Tuesday signaled they were looking for ways to scale back the broad anti-fraud law that federal prosecutors have used in convicting former Enron CEO Jeff Skilling and scores of other corporate and public officials.

The 1988 statute at issue in two cases argued before the high court Tuesday makes it a crime to “deprive another of the intangible right of honest services.”

During two hours of oral arguments Tuesday, the Supreme Court heard presentations against the honest services law from lawyers for media magnate Conrad Black, the former head of newspaper company Hollinger International, and Bruce Weyhrauch, an Alaska state representative who sought a job from the oil field services company VECO at the same time he lobbied fellow lawmakers against a proposed oil tax.

Lower courts across the country have issued widely varying interpretations of the 21-year-old federal law, which is a popular tool for prosecutors in cases involving corporate fraud and public corruption.

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During the oral arguments, justices questioned whether the 28-word honest services law was so vague that it could make federal crimes out of relatively mild transgressions, from a worker calling in sick to attend a World Series game or employees reading the Daily Racing Form while on company time.

“Perhaps there are 150 million workers in the United States,” Justice Stephen Breyer said. “I think possibly 140 million of them would flunk” a vague honest services test.

Justice Antonin Scalia said the law was “a mush of language” from Congress that was “inherently vague” and subject to abuse by over-zealous prosecutors.

“I don't know how you can expect the average citizen to figure it out,” Scalia said.

Where other legal terms are familiar and well understood, “honest services is not,” Chief Justice John Roberts said.

Michael Dreeben, the deputy solicitor general representing the federal government, sought to assuage the justices by cautioning that the honest services crime is reserved for instances where a defendant had an “intent to defraud” an employer or the public and the breach of duty was significant, or “material.”

Not “everything that the employee does is a crime,” Dreeben said, indicating that while goofing off on the job might be a fireable offense, it wouldn't be a criminal one.

Black was convicted in 2007 of three counts of mail fraud for diverting corporate funds for personal use. A federal appeals court upheld the conviction as a violation of the intangible right to honest services, and Black appealed to the Supreme Court.

Black's lawyer, Miguel Estrada, argued that Black should not have been convicted of honest services fraud because he did not intend to inflict harm on his company.

Weyhrauch has been indicted but not yet tried on honest services fraud charges.

Weyhrauch's lawyer, Donald Ayer, said his client did not break the honest services law because there are no state or federal requirements that state lawmakers disclose job searches before voting on issues that are key to potential employers.

The honest services law is also the focus of Skilling's appeal, set to be heard by the Supreme Court next year and briefly discussed during the oral arguments Tuesday. The former executive is now serving a 24-year sentence on 19 convictions of conspiracy, securities fraud, insider trading and lying to auditors about the 2001 collapse of Enron.

Not all of Skilling's convictions rested on the honest services legal definition, so even if he is successful before the Supreme Court on that issue, that alone would not result in a full retrial.

In the Skilling case, the high court is being asked to decide whether a defendant must be seeking private gain to violate his legal obligation to an employer under the honest services law. Skilling also is asking the Supreme Court to decide whether the statute is so vague it is unconstitutional — an issue several justices signaled they were eager to explore Tuesday.

But Dreeben urged justices to wait until Skilling's lawyers and the federal government submit legal briefs in that case.

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It is likely the Supreme Court will defer any decision in the Black and Weyhrauch cases until after hearing arguments in Skilling's appeal, and then decide all three together before June.